Credit Suisse and Michael Klein have ended an agreement for the Swiss bank to acquire boutique investment banking arm The Klein Group, LLC due to its planned takeover by UBS, according to a brief announcement within Credit Suisse’s first-quarter results on Monday.
The deal, first announced in February, saw Credit Suisse set to acquire the ex-Citigroup banker’s investment firm for $175 million and merge the business into Credit Suisse’s CS First Boston investment banking unit, led by Klein.
But talks collapsed after Credit Suisse
CS,
CSGN,
underwent an emergency takeover by Switzerland’s biggest bank UBS
UBS,
UBSG,
last month. UBS executives reportedly had little interest in following through with the deal, Bloomberg reported in March.
News that the embattled Swiss bank would drop the investment bank deal was included in its first-quarter results that were announced Monday. While Credit Suisse swung to a net profit, reversing five consecutive quarterly losses, it also recorded 61.2 billion Swiss francs ($68.7 billion) of net outflows in the quarter.
“These outflows have moderated but have not yet reversed as of April 24, 2023,” the bank said in its earnings statement.
U.S.-listed shares of UBS were up over 1% on little volume in Monday premarket trading. Credit Suisse’s ADR stock increased over 2% early Monday.
The share rise for Credit Suisse are “neither here nor there” when they are worth under 1 Swiss franc, Michael Hewson, chief market analyst at CMC Markets UK, told MarketWatch in an email on Monday morning.
Another analyst was alarmed at the scale of Credit Suisse’s losses and outflows, adding that it could remain a drag on UBS’s operation results unless “a deeper restructuring plan is announced”.
“While some may argue not as bad as feared, we would remind investors Credit Suisse has been running as a standalone entity since the end of March. There is more to come,” Thomas Hallett, analyst at Keefe, Bruyette & Woods, remarked in a note to clients on Monday.
“Simply put, even if UBS is able to take out CHF8bn of costs by 2027, the revenue trajectory is so damaged (annualizing 1Q23 only equates to CHF10.9bn) that the deal could well remain a drag on UBS operating results unless a deeper restructuring plan is announced,” he added.
Investors will now be looking ahead to UBS’s quarterly results, expected on Tuesday.
This post was originally published on Market Watch
